Obama enters new year with no economic vision

Opinion: At the White House, an empty chair instead of hope and change

President Obama has a very thin bench for economic policy making, and few ideas of his own.

WASHINGTON (MarketWatch) — President Barack Obama is poised to start the new year and the last three years of his presidency without a coherent economic policy.

In fact, there is an empty chair where there should be an economic guru capable of helping the president stamp his legacy on American history.

The financial crisis of 2008-09 arguably hobbled Obama’s original economic team, forcing them into a reactive mode where the priorities were to prevent a collapse of the financial system and stop the economy from entering into a deflationary spiral.

And that team — Larry Summers, Christina Romer and Austan Goolsbee with an able assist from Ben Bernanke at the Federal Reserve and a single-minded effort by Timothy Geithner at Treasury to preserve banks— managed to do that.

But their efforts were insufficient to eliminate the drag on the economy from toxic assets on bank balance sheets or to stimulate demand for a robust recovery.

Instead, hampered by a chief executive who cared little for economics, the administration made a political choice to pursue health-care reform instead of an aggressive economic package like Franklin Roosevelt’s New Deal.

In short, they wasted a good crisis. Worse, demonstrating political timidity and naiveté in equal measure, Obama met the deficit hawks on their own ground and embraced a policy of fiscal consolidation in the midst of a recession, undermining any further effort to invigorate the economy.

As a result, unemployment has remained stubbornly and unacceptably high, recovery remains sluggish and fitful, and the economy faces new financial bubbles due to the efforts of a frustrated Fed to make up for the ineffectiveness of the administration by flooding the market with money.

With the worst of the crisis behind us, the vacuum in economic policy making has become even more apparent.

Summers left the administration to cash in on Wall Street gigs and await his expected anointing as Fed chairman. Romer left in sheer frustration after unsuccessfully trying to pierce the crony old-boy network in the White House.

In the place of these two world-class economists, the White House policy team has been steered by economic mediocrities like Gene Sperling, a lawyer with no training in economics who is head of the National Economic Council, and Jason Furman, a trained economist who has followed a political career rather than coming to the head of the Council of Economic Advisers with an established academic reputation, like most previous occupants of that post.

Meanwhile, the Treasury Department, which has the pride of place in the economic pecking order, is not really a policy maker in the best of times. Neither Geithner nor his successor, Jack Lew, have been in a position to generate any effective economic policy.

The missteps and bad choices in Obama’s first term now severely limit the administration in finding any overarching vision or strategy for economic policy.

Instead, the president is left to take up whatever buzzword has some traction — currently it is inequality — and apply his little supply of band-aids to these issues du jour.

This is so far from the hope and change promised across the board by candidate Obama that it is painfully embarrassing. Obama has been largely unable to recruit any economic advisers outside the circle of Clinton administration retreads (Goolsbee, the exception, quickly retreated to the comforts of academe).

Far from being a bold agent of change or the transformational president he has consulted with presidential historians about being, Obama has as a result presided over a rudderless, ineffectual economic policy that falls far short of progressive priorities of reducing unemployment and improving the lot of the working class.

And there’s no sign that will change next year, or the year after that, let alone in the ultimate lame-duck final year of his presidency.

Sperling, who was supposed to leave the administration Jan. 1, will delay his departure a month or so after his appointed successor, Jeffrey Zients, was drafted to fix Obamacare. Zients, a former management consultant and entrepreneur, has employed his expertise as acting budget director, but has no formal training in economics.

Furman, whatever his qualities, does not have the ear of the president nor the heft to make himself heard on any meaningful policy initiatives.

Obama, famously, prefers to work with people he feels comfortable with, which is why he persisted in his intention to appoint Summers to the Fed long after it was clear that choice was politically unacceptable (as if the president “works” with the Fed chairman anyway).

This will make it virtually impossible for him to recruit an economist of any stature or vision for the top economic policy posts because Obama is patently uncomfortable with any economic thinking that goes outside the box of now-obsolete Clintonomics.

The economic policy chair is likely to remain empty, leaving the U.S. economy at the mercy of corporations pursuing profit for their shareholders and a Fed that has pretty much reached the limits of what monetary policy can do.

The White House will continue its small-ball politics, tweaking subsidies and grants where it can, and continuing to convene summits on big issues without actually accomplishing anything.

The responsibility for all this lies, of course, ultimately with the president. Which makes you think that maybe Clint Eastwood was on to something after all when he conducted an interview with an empty chair sitting in, as it were, for the president.

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